This Is What Hyperinflationary Collapse Looks Like

Tyler Durden's picture

There was some good news for citizens of Venezuela yesterday, when the government - having mostly given up on trying to provide its citizens' with even the most basic food needs - announced it has opened its border with Colombia for the second time this month to allow people to buy food and medicine unavailable at home in their country's collapsing economy. Colombia's government said 44,000 people crossed on Saturday to buy food, medicine and cleaning products and said it expected that number to almost double on Sunday.

Bus terminals were packed and hotels filled to capacity in the border town of San Antonio, with many traveling hundreds of miles to shop.

The result of the scramble to obtain much needed staples is shown in the photos below.


Venezuelan citizens waiting to cross into Colombia to buy supplies


More than 100,000 Venezuelans crossed into Colombia over the weekend in
search for food and medicine.


Venezuelan women buy food staples at a local shop in Cucuta, Colombia


Tebie Gonzalez holds a wad of Bolivar bills as she exchanges what remains of
her  and her husband's savings.


Crowds of people flooded the bridge that links to the Colombian city of Cucuta
to cross the border on foot


Activists handed out anti-government pamphlets, looking to galvanize the
frustration that has characterized food riots


The border was heavily packed by Venezuelan troops, the crowds were mostly
orderly amin and atmosphere of tense excitement

According to Reuters, last week, over 35,000 people crossed over for the first time since the governor of Venezuela's state of Tachira, opened the border.  Socialist President Nicolas Maduro shut the border last year in an effort to crack down on smuggling of subsidised products.

Venezuela's product shortages have since worsened, creating further incentives to buy goods in Colombia and bring them back. Venezuelans routinely spend hours in lines at home seeking items ranging from corn flour to cancer medication to car parts. Shoppers complain of violence in lines, and looting is on the rise. 

* * *

That was the good news. The bad news for ordinary Venezuelans is that unless they can permanently move to Colombia or any other country, their plight is only going to get worse.  The reason is that according to the IMF, Venezuela's consumer-price inflation is forecast to hit 480% this year and top 1,642% in 2017, according to the International Monetary Fund.  At that point it will proceed into suborbital hyperinflationary territory, hitting 2,880% in 2018 before "plateauing" at 3,500% in 2019.

While it has been speculated that the insolvent nation will soon have to ask the IMF for a bailout, Venezuela, whose government severed ties with the IMF nearly a decade ago under its former socialist autocratic leader, Hugo Chávez,  hasn’t tried to restore relations with the world’s emergency lender.  Cited by the WSJ,  IMF spokesman Gerry Rice said that “there has been no change in Venezuela’s relationship with the fund. The Venezuelan authorities have not contacted us."

China, seeking to take advantage of poor political relations that many African and Latin American nations have with the U.S. and Western-based institutions like the IMF, has been giving Venezuela and other commodity exporters cheap loans to help tide them through the commodity slump. Last year, the country supposedly secured $10 billion in cheap credit to help keep it afloat. The problem is that that loan was pledged by oil at much higher prices, which means that now Venezuela has to pump overtime just to meet its obligations to Beijing, as we explained previously.

While those loans may keep the state budget limping along, including massive costly subsidy programs, and strengthen political ties to Beijing, they don’t require the deep policy overhauls many economists say are vital to repairing the broken economy.

Meanwhile, Venezuela's problem is simple: a lack of credible currency as the value of the Bolivar has imploded as a result of the policies of Maduro, leading to a collapse in the economy.

“A lack of hard currency has led to scarcity of intermediate goods and to widespread shortages of essential goods—including food—exacting a tragic toll.” –IMF Western Hemisphere chief, Alejandro Werner, “Latin America and the Caribbean in 2016: Adjusting to a Harsher Reality”

The bottom line is that even the IMF appears to have given up: “we have dire forecasts…predicated on very limited information that we have.” Gian Maria Milesi-Ferretti, Deputy Director, Research Department, IMF, at the October 2015 World Economic Outlook press conference.

So for those who are curious what modern-day, runaway hyperinflation looks like, here is the IMF's forecast of Venezuela's inflation over the next three years. We can't help but chuckle that even in this dire case the IMF chooses to put a positive spin on events, and predicts that instead of exponential inflationary growth, somehow the country's CPI will "taper" by 2019. Good luck.

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NoDebt's picture

Every time I look at pics from Venezuela I count the fat people in the photo.  Originally, I thought that number would be fairly constant over time.  But, actually, much to my surprise, they ARE looking a bit more trim, on average, than they used to a couple years ago.  

The "silver lining" of your country financially collapsing:  you'll lose a few unwanted pounds.

More Ammo's picture

No muffin top on Tebie there huh?

Friedrich not Salma's picture

This link of a Vice News video jumps right to a demonstration of what you're speaking of. The 4 minute video is informative.

https://www.youtube.com/watch?v=5SeVv277d0I&t=3m0s

NoDebt's picture

That's a fantastic video.  That guy was showing off how he had to punch extra holes in his belt from all the weight he lost.  We're not talking about an inch or two.  We're talking OVER A FOOT of belt length down from the smallest hole.

 

Kprime's picture

damn I'm looking forward to a huge collapse here in the US.  I need to lose about 20 lbs.

now what am I going to do with all these chickens and cows and this 2acre garden.  guess I'll just have to eat more.

bob_bichen's picture

Having found myself with a job teaching English in Managua during Economic Collapse, I have to assure you that hunger is really not a joke.  In periods of hyperinflation where one spends one's money as fast as one can because it literally loses its value before your eyes, the working poor truly suffer like none of you who CROW about the suffering in Venezuela can ever imagine.  There is no humour whatoever in a daily struggle to find enough to eat, a struggle that easily one billion people around the globe engage in every single day.  There is nothing "funny" about parents struggling to feed their hungry children, frequently starving themselves to do so.  

Take a moment to remember your humanity, Gentle Reader.

Starvation really isn't a joke.  Sorry, ZHers.

[And blaming it on "socialism" doesn't make it OK.  A "socialsist's" starving child is just as heart-breaking as a Republican's starving child.]

MilwaukeeMark's picture

+1000
Thanks for adding a bit of reality to ZH. Too often we can be consumed with making clever comments forgetting that there are real people affected by these articles. There by the grace of God go I.

PTR's picture

Bookmarked.  Don't see these kinds of comments enough here.

DirkDiggler11's picture

I don't see Venezuela lasting 3 years in its' current state at this pace of decline...

Bay of Pigs's picture

I wonder how gold has done in Venezuela Bolivar...

Jason T's picture

Animal Farm ....

silverer's picture

Mostly really good people, the people of Venezuela. It's really tragic they have to through this due to the psychological problems of one madman.

Tactical Joke's picture

You pays your money. You makes your choice.

They've chosen poorly. The USSA's time will come.

Herd Redirection Committee's picture

I am sure that as soon as Venezuela (largest proven oil reserves, although it is tar sands, on the planet) is ready for Democracy, Walmart, McDonalds, Exxon and Shell, things will go much better for them...

Chuck Walla's picture

Walmart, Mickeys and gas stations. All sell food. I bet they would love to have the easy access to calories they lack now. 

FORWARD SOVIET!

NoWayJose's picture

Out of control inflation ripples everything in the supply chain. Why sell a pound of masa today for 5 'clams' - when tomorrow it can be sold for 6 clams? And why would a food distributor sells 10 cases of masa today, when they can raise the price 16% overnight.

Moral of this story - get some food onto YOUR own shelves!

pashley1411's picture

"hyperinflation" is merely a symptom.    Predatory and confiscatory government is the disease.

Same reason why it seems like, here in Colorado, I'm recently seeing a spat of former Illinois residents.

The 20th centruy might have been the century of voting with at the ballot box; the 21st century willl be century of voting with your feet.

Tactical Joke's picture

Sadly, like the Kalifornians, they won't learn from their past mistakes. Colorado is lost.

MaxDemon's picture

True unless the people of Colorado take protective steps now while they can.  Things like an amendment to the state constitution requiring balanced government budgets at all levels, and to allow debt financing only for physical assets that last more than 10 years. ALL other governmental expenses to be COD.

MaxDemon's picture

True unless the people of Colorado take protective steps now while they can.  Things like an amendment to the state constitution requiring balanced government budgets at all levels, and to allow debt financing only for physical assets that last more than 10 years. ALL other governmental expenses to be COD.

MrButtoMcFarty's picture

Behold....Obama's American Dream.

youngman's picture

Two things....they said they were paying in Bolivars...now who in their right mind in Colombia would take that currency for their products.... as of today Colombia closed the border again because of security.....me thinks it was because they were buying everything and causing shortages for regular Colombians.

Edward Morbius's picture

So, "Bolivar" is the new term for a Lewinsky? Guarantee those two hotties in the photo are not paying with currency... :~)

Sam Spayed's picture

Do you think they regret voting for Mr. Chavez' crew???

One-Eyed-Thong's picture

no

but they're not so happy about repatriating their gold from european banks

One-Eyed-Thong's picture

prepare for the dropping of the truth bomb... ready... here it goes....

 

HYPERINFLATION IS IMPOSSIBLE WITHOUT FIAT CURRENCY

 

 

ka-boom !!!!

read 'em and weep, cuntz

One-Eyed-Thong's picture

prepare for the dropping of the truth bomb... ready... here it goes....

 

HYPERINFLATION IS IMPOSSIBLE WITHOUT FIAT CURRENCY

 

 

ka-boom !!!!

read 'em and weep, cuntz

RadioFlyer's picture

Photo Caption: "Venezuelan women buy food staples at a local shop in Cucuta, Colombia"

 

I do believe that appears to be the COOKIE aisle.

coast's picture

hookers:   buy one get one free

Know shit's picture

Ok it's no walk in the park..
But Weimar was worse.

And I think what we will endure is going to be even worse than Weimar.

Lets just hope I know shit, but just be prepared...

Take care.

Farmer Joe in Brooklyn's picture

Honest question: 

In a hyperinflationary environment where the value of gold in local currency goes to, say, 10x (ex: $10,000USD/oz), what would be the corresponding value of real estate..?

Would land/home values be 10x..? 

I'm sitting on pm's and contemplating buying some land. 

Personally, I believe we will see a deflationary collapse before they crank up the presses to hyperdrive and the dollar gets right and truly fucked.

Thoughts?

painlord-2k's picture

It depend on the market:
if there is not enough demand, the price of land will "fall" to the level of cars or lower, until it find someone interested in buying.
if there is demand, maybe because the land can produce food that can be freely sold,  the price will revaluate to keep up with the real value.

bob_bichen's picture

Mr Farmer....  You ask for thoughts.

It is difficult to convey to you the innumerable unimaginable pitfalls in swooping into a country full of starving people like a "vulture capitalist."  The very shakky notion of "ownership" in such a chaotic situation is a good place to start. 

 

I posit you might consider placing YOURSELF in the situation of the starving peasant seeing the "vultures" circling, and what your reaction might be.  It's a difficult concept to get one's head around when one has a full regrigerator, a full stomach, a warm bed, and money in one's pocket that will actually buy something. 

Farmer Joe in Brooklyn's picture

Sorry, I didn't mean buying land in Venezuela. Talking about the US. I own land and a house in Costa Rica and in process of dumping it for that very reason.

khakuda's picture

While the rest of the world isn't Venezuela in many ways, isn't it great that Bernanke, Kuroda and the rest of the world's central bankers are trying to follow the presciption of creating inflation by relentlessly debasing money, thinking they can control the genie once it is out of the bottle?  Hubris squared.

rejected's picture

But, but, but,,, their stocks are at an all time high!

MaxDemon's picture

Well that isn't too bad , yet...

I bought a $100,000,000,000,000 (yes $1T) dollar bill (Zimbabwe) for about $10USD, which was mostly shipping and handling because it was worth about 10 cents at the time.

It's real quality money: well printed on good rag paper, and it's even pretty!  It just isn't worth squat!   And that is the value of fiat money with a corrupt and incompetent government. 

MaxDemon's picture

Well that isn't too bad , yet...

I bought a $100,000,000,000,000 (yes $1T) dollar bill (Zimbabwe) for about $10USD, which was mostly shipping and handling because it was worth about 10 cents at the time.

It's real quality money: well printed on good rag paper, and it's even pretty!  It just isn't worth squat!   And that is the value of fiat money with a corrupt and incompetent government. 

Reader1's picture

You ought to see the framed art piece I made showing real Zimbabwean, 90s Yugo, Post-Soviet, 90s Turkish, Wiemar, and other hyperinflated and bogus currencies.  The bottom has a quality Chinese bogus Silver and Gold Eagle.  I haven't made the engraved plate for it yet.  My first title was, "In God We Trust, The Rest Pay Cash," but that seemed wrong, so now I think it will be, "In Gold We Trust."

Bemused Observer's picture

Why are people starving in Venezuela? I'll bet a lot of folks in that crowd have cell phones...they seem decently dressed. But there's no food? In a country with a year-round growing season, there's no food.

Or is it that there's no PROCESSED food? No cans of soup, no boxes of snacks or side dishes, no styrofoam packages of meat, no cardboard containers of milk...I think that is more the case here. Because it is beyond stupid that anyone in that country should be hungry. Poor? Yes. But starving? No, there's no excuse for that. In fact, that country ought to be EXPORTING their surplus food now, since they need cash.

Kate Millet wrote about a peculiar form of 'poverty' often seen in people for whom being poor is far from their biggest problem. In 'The Basement' she tells of a family on welfare, chronically poor, who have only ONE spoon, that they share. Millet asks why ANYONE would have to share a single spoon, when you can get a handful of spoons from any Dairy Queen or fast food restaurant...and they are all over the place. Spoons can be found everywhere, for free...if they are eating with their fingers, it isn't because they are poor.

Poverty was NOT the family's problem...Being totally unable to manage their lives was. And that seems to be the problem with countries like Venezuela and too many others. They are sharing a single spoon when they don't have to because they are 'frozen' in helplessness. They just can't imagine themselves going out and GETTING some more damned spoons.

Reader1's picture

I often wonder why countries like Venezuela or Zimbabwe, which look to be so fertile you could grow veggies in a pair of shoes overnight can't seem to grow anything to feed themselves, while hippies here can produce a ton of food on a balcony or porch or rooftop.  Even Cubans can turn 6 square feet of space into a garden.

surf@jm's picture

What is it about humans, that they will allow the few, to destroy the quality of life of the many.......

Preying on the misery of the poor, to gain political power, with lies and false promises......

Sounds familiar, doesn't it?...... 

Reader1's picture

That's funny.  I was just asking my friend, Millionaire playboy Francisco D'Anconia, about how Venezuela was doing and he just laughed and laughed. 

Then, he asked me if I had invested in any of his mines...

Reader1's picture

It's a tragedy so many people have to suffer such an awful, slow, wasting death.

It's a comedy so many people have to suffer such an awful, slow, wasting death due to their own bad choices.

It's hilarious so many people suffering such an awful, slow, wasting death due to their own bad choices STILL consider themselves Chavistas.

Fuck 'em.  Can't wait to see more moochers go the same way.